Dixons Carphone swings to loss with mobile woes set to continue

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Dixons Carphone shares have plummeted as the retailer swung to a loss and warned that its mobile division will remain significantly loss-making in the coming year.

Pre-tax losses came to £259 million for the 12 months to April 27, the company said.

This compares to a profit of £289 million last year and includes charges of £557 million which primarily relate to the changing UK mobile market.

On a headline basis, which strips these costs out, profits slumped 22% to £298 million.

Meanwhile revenue dipped 1% to £10.43 billion.

The retailer’s bosses have previously admitted they were too slow to win over online shoppers and committed to a turnaround plan as UK consumers move away from buying long contracts on mobile phones.

Dixons Carphone said it would take “more pain” in the coming year, with mobile operations making a significant loss.

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The company said that headline pre-tax profits will decline again to about £210 million in the current financial year.

Shares fell by more than a quarter in early trading on Thursday, dropping at one point to just 90p.

But chief executive Alex Baldock insisted this would be the lowest point before turnaround plans begin to bear fruit.

“We expect mobile will at least break even within two years, and beyond that, equipped with a stronger and unconstrained offer, we will of course aim to do better,” he said.

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The company has renegotiated its legacy network contracts with mobile operators and is combining the mobile business with the electricals division, responding to the rapid changes in the market.

Mr Baldock also pledged to accelerate parts of the turnaround, with a goal to save £200 million brought forward by two years.

A target for margin improvement of at least 3.5% has also been pushed earlier and is now scheduled for the 2023 financial year, one year before originally planned.

Emma-Lou Montgomery, associate director from Fidelity Personal Investing’s share dealing service, said: “While elsewhere in the group the five-year plan is going to plan – if not a little better – the mobile phone business is under considerable strain as customers demand flexibility, are sticking with their old phones for longer and Carphone is dragged down by binding network contracts.”